FTX Brings BlockFi and BitFront to Bankruptcy

Posted November 30, 2022 10:27 AMUpdated November 30, 2022 10:34 AM.

Never two without three. Less than a month after the debacle triggered by the discovery of questionable practices, the FTX cryptocurrency exchange platform caused the collapse of BlockFi and BitFront. These two participants, respectively the digital asset lender and the cryptocurrency exchange platform, directly or indirectly bear the brunt of the antics of Sam Bankman-Freed’s company. On Monday, November 28, they fell under Chapter 11 bankruptcy law one by one. This way, they can keep working while developing a repayment plan for their creditors. The collapse of FTX may push other players to choose this status.

Reduce sail

BlockFi justifies the maneuver with a desire to “stabilize its business and give itself the opportunity to complete a full restructuring deal to maximize value for all customers.” Japanese parent company BitFront LVC Corporation, for its part, says it is terminating its cryptocurrency exchange service in order to keep the development of its Line blockchain and its Link token. The latter indicates that the exchanges will be suspended by the end of the year, and withdrawals by depositors will not be possible after March 31, 2023. BlockFi’s schedule has not yet been determined. But the company is gearing up to implement a cost-cutting strategy, hoping to salvage most of its investors’ shares. The management agreed to the dismissal of two-thirds of the 292 employees.

According to the bankruptcy filing, BlockFi says it has nearly 100,000 creditors. BitFront, for its part, has yet to announce this. The bankruptcy of a digital asset lender is directly related to its over-reliance on FTX. The latter signed an agreement to set up a $400 million credit line with Sam Bankman-Fried’s company last June during the “crypto crash” that rocked the sector. This forced it to block withdrawals for its 650,000 customers once the platform filed for bankruptcy on November 11. BlockFi hasn’t said its last word. The company, which claims to have about $260 million in cash, believes that this amount will allow it to restructure.

He also intends to return a 7.6% stake in financial company Robinhood, or the equivalent of 648 million euros, in an agreement signed Nov. 9 with Emergent Fidelity Technologies, another company founded by the FTX boss. The digital asset lender has initiated legal proceedings in this regard. For its part, BitFront simply pointed out that its bankruptcy was “unrelated” to the turmoil caused by the FTX case. The platform simply assured that its “effort to overcome the challenges posed by this industry that is evolving at breakneck speed” is not enough to allow it to continue.

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